backdoor Roth IRA contribution

A technique for contributing to a Roth IRA when income exceeds the contribution limit. Non-deductible contributions are made to a traditional IRA, and subsequently the traditional IRA is converted to a Roth IRA.

commentary

For those high income earners who have maximized their retirement plan contributions, backdoor Roth contributions can be a good choice. Since the contributions to the traditional IRA have already been taxed, the conversion is tax free. Note, however, that due to the IRA aggregation rule , the existence of a prior before-tax traditional IRA will cause a portion of the conversion to be currently taxed.